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The failure of normal business models in Football Clubs

I just read an excellent Article from Andy Green in the Guardian on the economics of Football clubs. Both he and David Conn have done a great job in exploring the failures of the recent takeovers of Football clubs in England.

Andy Green does however lend an ear to one salient point, which he then neglects to expand upon.

Such deals have proved a tragedy for English football as they have replaced community and success on the pitch as the priorities for clubs with the pursuit of profit.

Football clubs are not like traditional businesses, especially in countries like England where there is a high saturation of high-level clubs. Any simple equation would tell you the amount of profit required to sustain some of the debt loaded onto clubs in recent history is either unlikely or leaves the club having to borrow more to invest further.

You have a very limited support base, targetting new ‘customers’ is not as easy as you think. While you may be able to target children and get them to become fans, they unfortunately would be unable to contribute anything to your bottom line for quite some time.

Even in ‘clean’ environments like the recreation of a Football League in Australia 5 or so years ago, the number of clubs who have gone under is shocking. I feel among other reasons this is due to being unable to connect well enough with local potential supporters. The desire has been to build a ‘brand’ rather than building an association with supporters.

I like Martin Broughton’s assertion, finally, that leveraging short-term debt onto Football clubs is an awful idea.

One bad season and the club is very quickly up against it financially. Leeds United and Portsmouth are recent examples of this. My heart hopes Liverpool don’t join this club, though my head says the club is already in the brink.

If I were a Manchester United fan, I’d be nervous. Especially when one reads this weeks accounts. The entire transfer fee received for Cristiano Ronaldo was used to service a short term interest payment on a £500m bond taken out in January with the rest going on Interest from previous loans.

Despite their ongoing profitability, one bad season could put that at such risk as to make the stumble to using the entire profit base to pay off debt a very quick one indeed.

They try to associate themselves with us in the hope of providing some credence to their existence, but they’ll be gone and we’ll patiently still be around. We’ll be the ones who will devotedly resurrect the team after they run it into the ground, we’ll be the ones who’ll steadfastly bail their failed consortiums out after yet another disastrous new “business model”.

Let’s hope it hardly comes to that. Just as no employee who has worked hard for their company deserves to see that company go down the swanee because of short-term greed, neither do the supporters of Football clubs.